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Argentina implements soy tax withholdings

Argentina government officials assure they will fight inflation and subsidize internal consumption. The $3 billion currently collected through tax withholdings applied to the agricultural industry apparently are not enough. In order to keep inflation in check, President Nestor Kirchner wants to increase soy export withholdings by four points.

The formal announcement was made by the Minister of Economy, Felisa Miceli. She said the aim is to collect an extra $400 million dollars to subsidize internal consumption of wheat, corn and sunflower by-products.

Thus, bread, spaghetti, dairy, chicken and beef price increases would be stopped (costs due to corn-based feeding are high). These products were all affected by corn's international prices increase. Miceli believes the measure is justified due to record harvests announced for this year and due to the marvelous situation producers are facing, in her opinion.

Up to the present, the government collects $3 billion through withholdings from the rural sector, two-thirds from soy. These extra $400 million will also come out of producers' pockets. Soy tax will increase between 23.5% and 27.5%, while flour and oil will increase between 20% and 24%.

Farm organization CARBAP (Confederation of Rural Associations of Buenos Aires and the Pampas) "rejected and disqualified" the announcement. If it is applied, future productions will be damaged, according to leaders from La Pampa and Buenos Aires provinces. The national government must address the consequences of the measures that have been taken unilaterally and without listening to the rational proposals sent by the organizations.

"The announcement of the Minister of Economy and her sub-secretary Javier Urquiza, who had previously propitiated a proposal that included a two points increase in the exportation of flours and soy oils, clearly shows the impromptu nature and lack of seriousness with which the solution to the problems affecting this strategic sector of the Argentine economy is treated," CARBAP leaders pointed out in a release.

By the end of December, CRA, FAA, the Sociedad Rural Argentina (SRA) and the Agricultural Inter-cooperative Confederation (Coninagro) put under President Kirchner's consideration the creation of a $100 million fund, from the state's collection due to a greater harvest, in order to compensate for the difference between local and international price, and in order to continue to supply the domestic market. No answer has been received yet.

Meanwhile, the Argentinean Agricultural Federation (FAA) highlighted the need to avoid a price increase in products that constitute the basic food basket, "but in this context the measure simply seems to be an unnecessary provocation to the primary sector," they diagnosed.

They believe the measure is mainly "fiscal" and that it will deepen the "anti-rural policies," without benefiting the people, as occurred with the closing of meat exportations, when prices paid to producers dropped 30% without any benefit to consumer prices, for the difference was in the end left in the hands of exporters, they explained.

"Small and medium size producers will be the most affected. And the policies we have been requesting in order to defend rural town development, with a model that privileges the hundreds of thousands of families that do not fit in the current agricultural scheme that worsens with this type of measure, seem to be far away," the FAA claimed.

Miceli and her team's decision threatens to crack the relationship between the national executive and the rural sector.

Argentina government officials assure they will fight inflation and subsidize internal consumption. The $3 billion currently collected through tax withholdings applied to the agricultural industry apparently are not enough. In order to keep inflation in check, President Nestor Kirchner wants to increase soy export withholdings by four points.